SBSP3: quote, dividends and indicators for SABESP

Companhia de Saneamento Básico do Estado de São Paulo – Sabesp was created in 1973 as a mixed-capital company, with the purpose of implementing the guidelines of the National Sanitation Plan (PLANASA), aimed at expanding the country’s water and sewage infrastructure with financing largely backed by FGTS resources. In 1994, Sabesp was registered as a publicly held company with the Brazilian Securities and Exchange Commission (CVM) and, since June 4, 1997, its common shares have been traded on B3 under the ticker SBSP3. In 2002, it joined B3’s Novo Mercado, a segment focused on differentiated governance practices, and, in the same year, it was registered with the SEC, listing Level III ADRs on the New York Stock Exchange. Through successive secondary offerings, the State of São Paulo reduced its equity interest to a level close to half of the capital, a movement that preceded the privatization process concluded in 2024, when privatization was completed. The new corporate structure came to provide for the existence of a golden share held exclusively by the State of São Paulo, with specific veto powers over issues deemed strategic.

Sabesp’s main corporate purpose is to provide basic sanitation services, with emphasis on potable water supply and sewage services. The company is also authorized to operate in urban stormwater drainage and management, urban cleaning, solid waste management and related activities, as well as in energy projects and adjacent businesses tied to its asset base. In its core business, net operating revenue is entirely derived from the provision of sanitation services, reaching R$ 37.6 billion in the fiscal year ended December 31, 2025, with a single reportable operating segment. Net income for the period totaled R$ 8.462 billion, underscoring the financial relevance of a model based on long-term concessions, regulated tariffs and large operational scale. There is no material revenue concentration in individual customers, as no user or contracting party accounted for more than 10% of net revenue in 2025, a typical feature of public utility companies with a highly fragmented consumer base.

Sabesp’s operations are concentrated mainly in the State of São Paulo, where it directly served 375 municipalities in 2025, in addition to two municipalities in the wholesale segment (Mogi das Cruzes and São Caetano do Sul). Among the 375 municipalities with direct service, 371 are covered by the Concession Agreement of the Regional Unit for Potable Water Supply and Sewage Services of the Southeast Region (URAE‑1), executed in 2024 with a term through 2060 and conditional upon the completion of privatization, while four municipalities – Miguelópolis, Quintana, Nova Guataporanga and Olímpia – are served under individual contracts. In terms of customer base, the company maintained around 10.7 million water connections (active and inactive) serving 29.9 million people, corresponding to approximately 67% of the population of São Paulo state, and 9.2 million sewage connections, serving around 27 million inhabitants. Revenue is heavily concentrated in large urban municipalities: the ten largest accounted for 66% of 2025 gross revenue, with emphasis on the municipality of São Paulo, which alone accounted for 46% of the total, followed by cities such as Guarulhos, São Bernardo do Campo, Santo André, Osasco, Santos, São José dos Campos, Barueri, Praia Grande and Diadema.

The water production process involves abstraction from surface and underground sources, chemical and physical treatment and distribution through an extensive network of reservoirs and mains. Sabesp operates dams subject to the National Dam Safety Policy, with 28 structures classified and supervised by the competent state authority, which imposes monitoring and safety standards. Conventional treatment includes steps of pre-chlorination, pH correction, coagulation, flocculation, decantation, granular media filtration, post-alkalization, disinfection and fluoridation, as well as the use of advanced technologies such as ultrafiltration membranes and reverse osmosis when necessary. On December 31, 2025, the largest reservoirs serving the São Paulo Metropolitan Region contained 509.3 million m³ of water stored for treatment, distributed among systems such as Cantareira, Guarapiranga, Alto Tietê, Rio Grande, Rio Claro, Cotia and São Lourenço. In the same period, the company operated 247 water treatment plants, with average monthly production of 70.7 m³/s for the metropolitan region, reinforcing the capital- and infrastructure-intensive nature of its operations.

Beyond sanitation in the strict sense, Sabesp has expanded its activities in adjacent businesses and corporate partnerships. The company holds interests in companies focused on industrial water reuse, pre-treatment of non-domestic effluents and power generation. Aquapolo Ambiental S.A. operates a water reuse unit that supplies the Capuava petrochemical complex in the São Paulo Metropolitan Region, while Attend Ambiental S.A. operates in the treatment of industrial effluents and sludge conditioning. Empresa Metropolitana de Águas e Energia S.A. (EMAE), in which Sabesp holds an interest, is a São Paulo-based renewable power generation concessionaire, with hydroelectric and thermal plants and operation of a hydraulic complex associated with the Billings and Guarapiranga reservoirs. In 2015, Paulista Geradora de Energia S.A. was created to install two small hydroelectric plants in the Cantareira System, with a total capacity of 7 MW, of which the unit at the Guaraú Water Treatment Plant began operation in 2023 and the Cascata Spillway unit in 2024. The company has also advanced into photovoltaic energy through Cantareira SP Energia S.A., and into the recovery of urban waste with Barueri Energia Renovável S.A., in addition to having formed the SPE Infranext Soluções e Pavimentação S.A., focused on the commercialization of cold asphalt and related products.

The regulatory framework is a central element for understanding Sabesp’s risk profile and business model and, consequently, SBSP3 shares. The company is subject to federal basic sanitation legislation, updated by the New Legal Framework, which established universalization targets, requirements to prove economic and financial capacity, incentives for regionalized service provision, a ban on new program contracts and the assignment to the National Water and Basic Sanitation Agency (ANA) of the authority to issue reference standards for the sector. At the state level, ARSESP is the agency responsible for regulating and supervising the services provided for in the URAE‑1 Concession Agreement, including tariff setting and adjustments, quality and performance parameters, technical standards and the application of sanctions. The concession agreement provides for mechanisms to restore the economic and financial balance in the event of material regulatory changes, which may be addressed in ordinary or extraordinary reviews, depending on the impact on solvency and liquidity. The company is also subject to environmental, land use, licensing and water resource management regulations, as well as U.S. regulations related to ADR trading, such as the Foreign Corrupt Practices Act.

In terms of management practices and efficiency, Sabesp has been implementing initiatives focused on cost optimization, loss reduction and productivity gains. In 2025, initiatives highlighted included the adoption of Zero-Based Budgeting, review and standardization of the operational structure, modernization of meters with the replacement of more than 200,000 units, a specific operation to combat fraud in water connections and the implementation of a voluntary severance program with more than 2,000 participants. Preventive maintenance of hydraulic and electromechanical systems is treated as a strategic pillar, aimed at extending asset life, reducing long-term operating costs and mitigating risks of service interruptions and environmental impacts. These initiatives take place in a context of high capital intensity and a permanent need for investment to meet coverage and quality targets defined by the regulatory framework.

Environmental, social and corporate governance issues play a relevant role in Sabesp’s strategy, given the nature of its business. The company structures its ESG agenda through specific governance, which includes the Sustainability and Corporate Responsibility Committee, created based on the new bylaws approved in 2024 and composed of members with compatible experience or training, including a representative elected by employees. Sabesp publishes an annual Sustainability Report prepared in accordance with GRI standards, SASB standards and TCFD recommendations, and aligns its indicators with the Sustainable Development Goals and the principles of the UN Global Compact. The materiality matrix was revised in 2025 in light of the privatization process and the new sustainability strategy, reflecting priorities in topics such as efficient use of water resources, water quality, the social impact of sanitation, governance and transparency. In terms of geographic presence, all of the company’s operating revenue is generated in Brazil, with no operating activities abroad, which reinforces its concentrated exposure to the Brazilian regulatory and economic environment, albeit diversified among different regions of the State of São Paulo.